Honesty is the best policy Essay

Introduction: Honesty means â€Å"being honest†, another meaning â€Å"truthfulness†, Policy means â€Å"course of action adopted by a government, business group, individual, etc.† So here the complete meaning of the essay title is â€Å"truthfulness course of action adopted by an individual is the best one†. This â€Å"honesty† word is very much known to the whole world but has less impact on the majority of our society. Many social parameters are there which reflects honesty test, but in real sense there is no any concrete method to test honesty. If it would be then there would be no need of judiciary in the world. The largest judicial organisation are telling the story of dishonesty. Let us watch few honesty images. Value of Honesty: Highest complement for a person is a tag of honesty given by the society ; if he is attached to this virtue. Today’s biggest gap in true sense is the honesty; which is not strengthen properly in the school students. I am not saying that this value is not taught in the schools, but want to draw attention of the school teaching system about the falling graph of this ethical elements in present society. The school students must be engraved with honest practices rather than paying strong attention on science subjects. It is because this is one of the biggest virtue of the growing youngsters ; who will carry nation on their feet. Strong value of honesty will always be a biggest justification throughout the globe for the welfare of the whole humanity. We all have to dictate the tremendous value of honesty to our kids from very beginning in an easy understandable and practical way. True way of Solution of Human Problems: Many problems of the human society is because of less numbers of honest people. The today’s people forgot the best policy of living. In the world political system many wrong decisions are imposed wrongly because of self centered thinking irrespective of honest approach. In India recently Lokpal system was biggest news headlines. Lokpal is for protecting human interest and to monitor government decisions. I think this would not be required if honesty remains live in the human souls. If honesty remained the best policy of the past time then today’s evils would never come to damage the social, economical and functional balance of the society. Now the whole world have to rethink to renovate and rebuild the  honesty in the system by all possible means . Because no any system can check the every minister , clerk etc to stop corruption and self centered policy making. It is only the honesty of these men which will stop them to do disho nest to others. There should be a system to push honest people in the political system of all the nations. It is the only way to get the true solution for human problems. Advantage of Honesty: Honest people have high degree of social acceptance. They are not confined to a particular town but become the renowned personality of the larger area. It is such a quality of a human beings that uplift him at such a height that can not be achieved by working very hard in normal way. I am giving one such example of an honest man. He is non but the great Mahatma Gandhi of India; whose one word became the command for total Indians in the history. This is because of his honesty as a best policy. Every man believed from his bottom of heart that what Gandhi is telling is more than 100 per cent correct. There are many such examples in the world. Its invisible advantage are infinite. I said invisible because it can only perceived and can not be seen. Where and when we have to practice honesty: *At the time of paying for things at shop if shopkeeper is busy and forget to ask for payment. *In queue we have to be very honest to maintain it. *While checking examination copy of students. *While distributing something among family or in equal group. *At our professional position. Why people are Dishonest Today: It is noticed that human ethical index is degrading day by day. It is because the human beings have shifted from religious belief and become more scientific. But they don’t know that science only gives solution of naturally available thing. But creator is God; who created everything and is watching everyone. Honesty can only be judged in front of God and not in front of any law, system, anyone etc. Many of us also forget that science is very limited it will not be able to discover unlimited nature. If one consumes whole energy of the earth even then ten percent of sky distance is unreachable. It is my own calculation and according to my belief. Another example of perceiving the creator is that a bird flying above thousand feet can look the very small grains and  the bird can fly thousand of kilometer from one country to another with its small 500g muscle. Don’t anybody think this while flying in flight which requires gallons of oil to c over only 1000 km. If anyone can understand this then he is with my view. Conclusion: We have to realize the value of honesty otherwise social, economical balance will be lost. One day we have to answer our life before God. It is certain to happen otherwise no religion would exist on this earth. Much more can be written about â€Å"Honesty is the Best Policy Essay†. I will write short point wise essay for grade 1 to 2. Keywords: honesty is the best policy story, honesty is the best policy quote, pictures on honesty, honesty in life.

Impact of dancehall music on society Essay

Dancehall, like most music, is a form of self-expression. It is an art form through which the artiste can relate to events and issues of their lives. Its popularity forces its involvement into most events with its pulsating rhythms and catchy lyrics. The influence of dancehall music on society has contributed heavily to the violent and sexual behaviour and increase in drug use among youth. Dancehall music is a culture which impacts fashion, style and body language. Its elevation of sexual immorality, drug abuse and violence to the young impressionable minds, who adopt these things as part of their daily lifestyle, shows how it has influenced their behavioural pattern. Dancehall music in today’s society exposes the minds of young people to violence. It is believed that the lyrics in the music influence violent behaviour on a subliminal level. This influences the youth to behave violently and deem it as acceptable behaviour. The more the youth listens to the music the more their actions are influenced and persuaded to be involved and even encourage violence. The lyrics in the songs play a vital role in shaping the listeners as well as giving some insight on the kind of person behind the lyrics. Many artistes have found themselves in trouble with the law, ranging from misdemeanours to felonies, and their backgrounds and their lyrics are usually correlated. The glorification of sexual immorality is a popular theme in dancehall music. The promotion of promiscuous behaviour and sexual acts are a common fixture in the genre and the lyrical content tends to influence its youthful listeners. The immoral sexual behaviour of the youth is due to the stimulating effect of sexual music and they tend to gravitate towards it believing that it is acceptable conduct. In turn this raises public health concerns in regards to sexually transmitted diseases, teenage pregnancy and the human immunodeficiency virus and gives an unhealthy view on sex. Research has shown that there is a correlation between dancehall music and the proliferation of sexual activities. The findings revealed that females more than males were more likely to respond psychologically to the  lyrical content of the dancehall genre and that the music is highly influential and can create negative impacts on youths, who imitate these negative acts. The evidence indicates that another neg ative message dancehall music is promoting are drugs and drug abuse especially that of marijuana. Dancehall music is having a negative impact on youth through drugs because various youth who listen to dancehall are smoking drugs or are being influenced to smoke drugs. The influences are derived from the lyrical content of the music or by friends who were influenced before. The promotion of marijuana on the market for students causes them to go out of their way to smoke or sell to others to earn money and sometimes make a living. At present adolescents are forming gangs, abusing drugs, fighting, showing a lack of respect to elders and creating pornographic movies on mobile phones as well as altering uniforms to match fashion trends. These behavioural patterns not only have a massive negative impact on the academic performance of the youth but also on their health and lives. There is no doubt that the influence of music on a whole on people is phenomenal. Therefore there is no reason to doubt the extensive effect of dancehall music on the minds of the youth. There is a strong relationship between dancehall music, sexual immorality, drug abuse and violence. Music plays an important role in the development of youths and the admiration of the sexual and violent behaviour which are portrayed by dancehall artiste damages our society and the youth are at risk of falling into that lifestyle. The impact of dancehall cannot be denied. There is a need for parents to control what their children listen to while broadcasters should also regulate what they air to protect society from absorbing a behaviour that doesn’t support good morals and values.

Pacific Systems Case Study Example | Topics and Well Written Essays - 1000 words

Pacific Systems - Case Study Example Pacific System Corporation aims at diversifying its scoop of operation by venturing into a new business line, DVD business. However, the business has troubles determining the most ideal supplier for it products. Pacific System Corporation’s management has managed to come up with four suppliers that it find ideal for this new business line. However, one of the four suppliers is to be selected and the process of selection should be quantitatively supported. However, as much as the business wishes to venture into the DVD industry, it is bound to experience hostile reception into the industry due to the stiff competition. Moreover, the industry is prone to counterfeiting by various website operators. The DVD industry group has however filed a case against these operators so as to counter this illegal activity. Pacific System Corporation is a medium sized high technology company. PSC is located in San Francisco. During the company’s early years of operation, it specialized in production of subsystems for personal computers and engineering firms. However, in the year 2000, the company diversified its scoop of operation by adding an engineering workstation to its product offering. Over the years, the company has undergone a transition from being a single product manufacturer to a multi-product manufacturer. Moreover, the company’s growth did not stop at that. The company expanded its business in the computer industry since it forecasted a steady growth in the consumer industry since due to the steady but slow economic growth. The company indulged in outsourcing of DVD drives for that matter. Decision to outsource DVD Drives was arrived at based on the market study that the manufacturing cost of these products in-house was highly prohibitive. Pacific System Corporation need to critically analyze and quantify its purchase needs. Local sourcing is the most ideal sourcing strategy for pacific System

Analyze the business environment of the China Essay

Analyze the business environment of the China - Essay Example Each of these forces is altering the business environment in China while creating new opportunities for multinational and national firms. Understanding the changes that are associated with the business environment of China also helps to define how businesses can collaborate with the country while using the current system, culture and expectations that are a part of the country. More important, there is the ability to understand the global alterations that are a part of the business environment in China and how this is constructing innovative measures for expansion and new products that can be used within the country. The main concept that is applied to the business environment in China is based on the divisions of regionalism as well as the closed environment that is a part of the nation. Even though there are several components that are pushing the country toward globalization within the market, there are also several components and regulations that are causing the environment to remain closed. The flow and allocation of capital, human labor in different regions and structural changes in different regions have all influenced the environment and the expectations among different business leaders. For those in China, this is creating specific measures within the economy as well as from the expectations that are a part of the business environment (Xiaolu, Gang, 1, 2004). The economics and expectations that are within China are not only a proponent of the environment because of the factors that influence business. Government expectations and the institutional environment have also led to specific expectations that are within the community. Each of these can carry a negative or positive influence both nationally and internationally and create a change in the firm value that is a part of different environments. The changes that

The Strengths and Weaknesses of Diversity in Global Teams Research Paper

The Strengths and Weaknesses of Diversity in Global Teams - Research Paper Example According to Magnus (2011), â€Å"Global teams are teams where members are globally dispersed, from different cultures, speak different languages and rarely meet face-to-face† (Magnus, 2011, p.35) Even though global teams bring many opportunities to an organization, it may develop lot of challenges also. Some researchers suggest that global teams increase creativity and innovation whereas many other are of the view that it may bring conflicts and poor performances. Global teams help organizations to utilize diverse skill sets in a fruitful manner; at the same time it can increase the conflicts within the team because of the cultural differences among the team members. Magnus (2011) pointed out that parameters such as â€Å"cultural diversity, geographical dispersion, means of communication (whether communication is face-to-face or virtual) and degree of language familiarity† etc can determine the success or failures of global teams (Magnus, 2011, p.36). This paper analy ses the strengths and weaknesses of global teams in business world. Strengths of global teams â€Å"Sociologists have found in their research and their work with organizations that when global teams are managed effectively, they can take advantage of the diverse perspectives offered by their members to create unique performance advantages for the company† (Maznevski & DiStefano, 2000, p.185). ... Microsoft, Apple, Google etc like many of the American companies are currently working in China. Same way plenty of Chinese companies are also functioning in America now. All these companies have global teams to manage their operations successfully at different parts of the world. Diverse knowledge, skillsets and capabilities will help these companies to adapt with the changing conditions. Badrinarayanan et al. (2011), mentioned that â€Å"sales organizations are increasingly adopting global sales teams to perform distributed work, meet customer needs, and achieve sales objectives† (Badrinarayanan et al., 2011, p.311). Since majority of the prominent organizations are currently operating cross culturally or internationally, their customer bases are extremely different. It is difficult for an American sales person to know the exact needs of an Indian or Chinese customer. On the other hand it is easy for an Indian or Chinese to know the requirements of local customers. Thus, Mic rosoft or Apple like American companies should appoint locals in their sales teams in these countries so that customers in these countries will get everything they expected from these American companies. In short, global sales teams can help an organization to customize their business strategies or sales strategies in overseas countries. For example, it is difficult for Benz or other automobile manufacturers to sell cars priced more than $ 100000 in Indian market. On the other hand, it is easy for them to sell cars priced less than $50000 in Indian market. It is easy for a local sales person to know such details and send such feedbacks to his company management. The management of global new product

Creating a Diffusion Line For the Stella McCartney Brand Essay

Creating a Diffusion Line For the Stella McCartney Brand - Essay Example The paper "Creating a Diffusion Line For the Stella McCartney Brand" discovers the supply base of the Stella McCartney brand. Chung et al (2001) and Malhotra (1986) explain that brand personality can also be helpful in creating customer loyalty in the saturated domestic market, and this has been true of Stella McCartney. This is achieved through interaction with positive associations with the personalities of the consumers. Abedania (2010) states that this interaction helps a company to gain deeper understanding of the perception of consumers towards the brand. Stella McCartney has been able to tap into the value of its organized value chains to increase its profit margins, and reduce its expenses like transportation. A retail structure should enable a company to reach more target customers with the product and give an insight to their perceptions. An analysis of the company’s retail organizational structure indicates that it serves the needs of the organization. The company o perates 17 freestanding McCartney stores situated in Milan, New York, Los Angeles and London’s Mayfair, Manhattan’s Soho, Paris’ Palais Royal, LA’s West Hollywood, Rome and Miami. Currently, her collections are distributed in more than 50 countries through a network of 600 wholesale accounts including department stores and specialty shops. There is also an online shop for customers to purchase products online. This retail structure does not allow the company to have a total control on the delivery of its products. An overview of the supply base of the Stella McCartney brand From the above discussion, it is clear that Stella McCartney has an extensive supply chain. This supply chain serves the needs of the proposed diffusion brand and its proposed buying strategy in various ways. First, the extensive supply chain ensures that high-end designs more and easily accessible to the public. The customers are to be allowed to access lowly-priced but specially desi gned products for a limited time. Information from IBISWorld (2012) revels that offering products that are moderately priced than the original line will ensure that the devised buying strategy captures customers from less wealthy and younger demographics. This is a group of budget-conscious buyers and thus this strategy is important in ensure that customer demand is sustained all through the business periods, especially when the value of once-elite brands fades and they no longer sell as they used to. There is room for improvements that will help in ensuring that the existing supply chain serves the needs, and buying strategy of the proposed diffusion brand to a better level. One of the recommendations is to enter into lower-priced designer collaborations with many fast selling fashion retailers. Although the products will be offered at different price ranges, this step will result to increased sales and thus a general increase in revenue. The company is able to interact and communi cate with customers through various ways through its supply chain. For for example, it uses brochures and direct customer service which ensures that the needs of the customers are always taken into accountability when coming up with new designs. Global distribution strategy for taking the product forward to both the B2B and B2C consumer The company’s distribution strategy for taking the product forward to both the B2B and B2C should be formulated from a multichannel perspective.

Cleaning tasks in home care Essay Example | Topics and Well Written Essays - 1250 words

Cleaning tasks in home care - Essay Example This essay describes the role of home health aide in maintaining a clean, safe and healthy environment. The essay further talks about principles of safe home environment and procedures for house hold tasks. It explains how to clean utensils, linen and personal items. Guidelines on organizing the household tasks are discussed in this paper. 2. Role of home health aide. Home health aide gives safety, cleanliness and health assistance by giving personalized care, checking for physical dangers and report to medical authority about the client. By helping in bathing, dressing and toileting they reduce the chances of discomfort and infections (Prieto, 2008, p. 184). Assistance in movement, taking medication and feeding reduces accidents. Purchasing, preparing, serving and feeding ensure the client remain healthy. In some cases the home health aide educates the client and family which facilitate their cooperation when it comes to maintaining a safe, clean and healthy environment. Home health aide gives support to client and family by ensuring the surrounding is comfortable and can allow safe mobility (Anene 2009, p. 46). 3. Principles of safe home environment. To maintain a safe home environment avoid objects that could cause stumbling. One can put hand rails or bars in the house for support. Cabinets with dangerous substances and tools should be locked. Allow temperature for water heater to be adjusted to prevent burns. Naked flames should not be left unattended. Moreover, ensure there is an equipped first aid kit and functional fire extinguisher ready and accessible. Communication should be encouraged. A safe environment will ensure that there is no risk of burns, drowning, chocking, cuts, falls, loud noise, falling objects, broken items, robes and naked electric wires. It may be necessary to implement a system of monitoring movement like a door alarm, bell or supervision. Ensure there is a working telephone in case of an emergency. The home health aide can practice appropriate body mechanics when moving, lifting and transferring client (Birchenall and Streight 2003, p. 4). In addition cover the mouth when coughing and wear a mask if the client is coughing frequently. Avoid sitting or standing too close to the patient when they cough or have flu. Ensure there is ventilation to allow flow of fresh air. Soiled cloths, linen and items should be kept away from the clean ones. They can be kept together in a room. The soiled linen can be wrapped so that the soiling is at the middle and does not spill. 4. Procedure, equipments and supplies for house hold tasks. Leahy et al (2008, p. 17) point out that, it is necessary to collect and get the right equipment and supplies to protect self and to avoid infection when cleaning. House hold equipments and supplies required include: broom, mop, dust pan, disinfectant, bleach, rag, scrub brush, vacuum and scrap. Infection control measures should be considered in every procedure. Wear gloves when performing task s and handling soiled linen, equipment or cloths. Clean hands regularly, preferably before and after completing tasks. Separate dirty and clean areas. The bathroom should be cleaned with cloth and the toilet wiped with a disposable cloth. When cleaning the kitchen start with the top to bottom, wipe spills and throw garbage daily. To clean the bathroom cleaning starts from top to bottom then clean sinks, shower and then the toilet. The floor and the water spills should be

Analysing online consumer shopping motivations for luxury products Essay

Analysing online consumer shopping motivations for luxury products (Methodology) - Essay Example Research Methodology This part of the study discusses the methodology which has been adopted for addressing to the research topic (Perry, 1998). The research has been made related to the topic ‘whether online shopping motivates the customers towards purchasing luxury products’. This part of the study would be sub divided into various segments, each part displaying some specific portion of the research methodology which has been implemented. 2. Research Philosophy Ontology Ontology is the initial point that will lead to the own established theoretical framework. It refers to the study of assumptions related to the nature of the social reality, what are the units that constitute this reality and how they interact with each other (Easterby-Smith, Thorpe and Lowe, 2002). Epistemology It is the branch of research philosophy which mainly focuses on the scope and nature of the knowledge. It is also referred to as ‘the theory of knowledge’ (Easterby-Smith, Thorpe an d Lowe, 2002). 3. Research Approach There are mainly two types of research approaches. One is the deductive research approach and the other is the inductive research approach. Deductive Research Deductive research approach helps in testing the validity of the research study in waterfall manner (Shaheen, n.d). This model follows a series of procedure i.e. theory establishment, followed by hypothesis generation, observation of the behavior of variables and then reaching the conclusion. Inductive Research Inductive research approach is a useful tool for converting the observation into theoretical conclusion (Shaheen, n.d.). This model follows a series of procedures i.e. observation of the behavior and relationship between the variables, identification of the type of relationship, establishing a suitable hypothesis and then reaching to the conclusion. 4. Data Sources The study requires collecting primary as well as secondary data in order to satisfy the research objective. Primary Data The Primary data is collected by the researcher himself/herself for conducting the research work. The primary data is generally collected by gathering the responses of the customers participating in the close ended survey that have been conducted for carrying out the research work. There are many forms of primary sources such as responses of the participants in the surveys, interviews etc (Somekh and Lewin, 2005). Secondary Data The secondary data is collected by reviewing the literatures that have been made on the same topic earlier. Secondary data collection is the process of collecting data where someone other than the user gathers the entire set of data (Vaivio, 2008). The data collected from the secondary research has helped to reach to the research objective in an appropriate manner. The secondary data sources like newspapers, journals, books, and data obtained from company websites and different working and research papers published by various academic scholars are utilised w hile conducting any research work. The collection of these data helps in proceeding in the research process in an appropriate manner. 5. Data Collection Approaches Quantitative Methodology The quantitative research methodology is such a research methodology which involves various computation techniques or statistical calculations (J. Hussey and R. Hussey, 1997). The methodology takes into consideration various statistical data for carrying out

Sustainability in the Hotel Industry Assignment

Sustainability in the Hotel Industry - Assignment Example The hotel industry forms an integral part of the tourism industry and if it is not managed properly could cause detrimental to the natural and social environment. Thus to reduce the impact, hotels are adopting the â€Å"go green† initiative. Until recently the hotel industry has been unaware of the environmental damage that it posed to the environment due to its operations and services. However the last two decades have bought about tremendous change and created awareness among the public and in the development of â€Å"green consumerism†. Therefore to achieve greater environmental responsibility, hotel industries are implementing the relevant strategies and tools. The hoteliers are aware that it is essential to protect the environment where it does its business and are crucial towards the development and performance of the industry. According to reports by Bohdanowicz et al. there exist a huge number of examples which shows the development of pro-ecological initiatives .1 With continuous growth in environmental degradation, society has become aware of the needs for adopting more effective measure towards protection of the environment. Sustainable development has therefore become vital priority as well challenge in the competitive environment. The sustainability issue should be addressed at all the levels ranging from the policy makers, industry, academia, and the general public and other stakeholders. The global tourism industry is expected to grow at a rate of 2.8% in 2012 and will represent 9% of the global GDP. The hotel and tourism industry is expected to contribute about $10 trillion to the growth of global economy by 2022 and generate... To conclude it can be said that Holiday Inn has implemented the going green strategies and has performed well in implementing the practices and this is evident as the hotel is a certified green lodging hotel and has also received awards for environmental sustainability. Holiday inn has taken into consideration the recycling process and conservation of consumption and waste. However, it is still important to keep inventing the going green process and sustain in the industry and achieve a competitive advantage. Some of the recommendation includes as follows,   Installation of the green roof will help to mitigate the effect of heat island and also helps to reduce the amount of energy to be required to heat or cool the rooms. Apart from providing environmental benefits, the green roof of the hotel will serve as a commitment of commitment towards sustainability and will provide the guest with a connection with nature. Secondly, the hotel can provide environmentally friendly transportati on for the guest. The transportation will provide fuel efficient and environmentally friendly environment to travel to the desired place by the guest. The low emission and eco-friendly bus would reduce vehicle emission, lighter traffic and a convenient way to travel for the guests. Thirdly, the hotel can install high-efficiency plumbing fixtures along with water reduction by implementing much more efficient fixtures, appliances and water landscaping outside the hotels to preserve water and reuse it.

Domestic Violenc in Ethiopia Essay Example | Topics and Well Written Essays - 4000 words

Domestic Violenc in Ethiopia - Essay Example So, part of the problem is your own self-perception and your own self-image, which is internalized through years of socialization and upbringing.(UN Population Fund's annual report, 2005) Ethiopia remains one of Africa's most traditional societies. Although the country has a great ethnic, religious and cultural diversity, attitudes towards women's rights are relatively homogenous in rural societies. Conservative outlook, incapable Governments (until the overthrowing of Menghistu in 1991) spending most resources on military campaigns, natural hazards and unwillingness to invest in rural societies are the main causes of widespread extreme poverty, to which women are the principal victims. The implications of this apathy are clear from the fact that during a recent survey by UN, the performance of Ethiopia was among the lowest. The domestic violence against women was in the crudest of forms, and there was not much redressal system. The aim of this paper is to assess extent of domestic violence in Ethiopia, its causes, involvement of Government and NGOs towards control/alleviation of the same and suggest some viable remedial measures. A Multi-country Study on Women's Health and Domestic Violence against Women, sponsored by the World Health Organization, between 2000 and 2003 collected data from over 24 000 women in Bangladesh, Brazil, Ethiopia, Japan, Namibia, Peru, Samoa, Serbia and Montenegro, Thailand, and the United Republic of Tanzania. The Study assessed women's experiences of violence using a questionnaire developed and validated for cross-cultural use, with a special focus on violence by intimate partners. It also investigated how such violence is associated with ill-health and injury, and the strategies that women use to cope with the violence. In Ethiopia, the Study was undertaken under the auspices of the Butajira Rural Health Program. The research team included members from the Department of Community Health and the Department of Psychiatry, Addis Ababa University; the Ethiopian Public Health Association; the Women's Lawyers Association, Addis Ababa; the Department of Public Health and Clinical Medici ne, and the Department of Clinical Science, Ume University, Sweden; and the Program for Appropriate Technology in Health (PATH), United States. Data collection in the field took place in 2002. Physical violence meant the woman had been: slapped, or had something thrown at her ; pushed or shoved; hit with a fist or something else that could hurt; kicked, dragged or beaten up; choked or burnt; threatened with or had a weapon used against her. Sexual violence meant the woman had been physically forced to have sexual intercourse; had sexual intercourse because she was afraid of what her partner might do; been forced to do something sexual she found degrading or humiliating. (The WHO Multi-country Study on Women's Health and Domestic Violence against Women: 2000-2003) The study highlighted certain known facts and some startling revelations regarding the apathy prevailing in the society. The following paragraphs bring out various aspects of domestic violence faced by Ethiopian women. Violence against women. Culturally-based abuses including wife beating and marital rape are pervasive social problems. While women have recourse to the police and the courts,

Categorisation in Long-Term Memory Essay Example for Free

Categorisation in Long-Term Memory Essay The method used was a field experiment as it took part in a classroom. This method was chosen because the independent variable can be manipulated to find the effect on the dependent variable, which can draw conclusions about cause and effect. Doing this allows reasonable control of extraneous variables and where the experimenter has a significant amount of control. An independent groups design was most appropriate because it prevents order effects and demand characteristics to a certain extent. There will be two groups, a control group who will be shown a random list of words and an experiment group who will receive a categorised list. This enables me to compare the number of words each group can recall and therefore claim the cause and effect. Independent variable Whether participants are presented with an organised list of words or not. Dependant variable Memory as measured by the number of words the participant recall from the list of words. Participants It was an opportunity sample of International school students from 13 to 14 years old. 10 participants were allocated into each condition randomly (condition 1: control group who received a random list of words, condition 2: experiment group with an organised list of categorised words). Each condition had 5 females and 5 males. Anyone that was available was asked if they would take part in the experiment. None of the participants dropped out and only 2 students refused to take part, because they were not free at that moment. This sampling method was chosen because it was quick and convenient. By using independent designs, some extraneous variables were controlled. Order effects were prevented since different participants were allocated in different conditions. Having clear and concise standardised instructions reduced confusion. The procedures were standardised to reduce any experimenter effects. The room was kept in a constant temperature to reduce it from possibly affecting participants memory. Students were ranged from 13-14 years old. Other noise from outside the room may have distorted the results and therefore all windows and doors were closed so that as little noise as possible was allowed into the room. The group of participants who received the organised lists of words recalled more words than the participants with the randomly categorised list. It was distinctive from the graph that people given categorised words recalled more words than people who received a random list. The results support my hypothesis of better recall from students if words were categorised. The relationship between the independent and dependant variable was if the words were categorised, the higher the recall. Discussion Validity Validity is if the measuring apparatus measures what its meant to measure. By looking at the number of words remembered, its an indicator of memory as it is clear that the more words you recall the more words were remembered, this is called face validity and its purpose is to see if the experiment is testing what its supposed to measure. I chose 3 categories of words to use in my experiment and I think that they were the correct categories to use as they were all only 1 syllable and are generally used in everyday life. This is related to construct validity which is whether the method can be used to support the variable that is being measured. (If the experiment was replicated, we would see similar results) I think that I chose the words that best measure organisation and that my test was valid. Ecological validity is if the experiment measures a naturally occurring behaviour. This was a field experiment which has good ecological validity but its not usual for someone to be taken into a room and to participate in a test on a daily life setting. The participants were aware they were taking part in a psychology experiment so the results could have been affected by demand characteristics. Suggestions for improving validity Participants were aware they were talking part in a psychology experiment which could have created demand characteristics and possible experimenter bias. To obtain a higher ecological validity I could have applied my study to school/everyday life. For example, asking participants to recall a list of ingredients that they had used to bake a cake. This could prevent demand characteristics and experimenter bias as participants might not be aware this that it is a psychology experiment and could possibly make my results more valid. Doing this however, would make it harder to control any extraneous variables and the study would be more difficult to replicate and standardise. Reliability Reliability is whether the measuring method can measure consistently. If the experiment was repeated, similar results would appear. I have increased reliability using the same words in both lists. Two different lists of words decreases reliability as some words are easier to remember than others. Therefore using the same words will reduce this effect. In the list of organised words it was obvious that the experiment was testing memory which led to demand characteristics. The experiment were standardised which meant its easy to replicate. However, because participants were already told that they were taking part in a psychology experiment on memory, they knew what the experiment was about and could try harder to perform better on the test (demand characteristics). Improving reliability If I were to choose a different sampling method results would be much more representative, because my sample was an opportunity sample with only people who were free at that moment. I could have chosen a random sample to increase reliability since there are different levels of cognitive abilities in students and not only people who were free. This method could be done by picking 10 males and females randomly (picking out names from hat) from each year group. This means a total of 70 subjects would be used instead of just 20 and doing this would give me more reliable results and a much more representative sample of school students. Also, to reduce demand characteristics the purpose of the experiment shouldnt have been told to the participants until after the experiment, which is called debriefing. Implications of study Bousfield found that we have semantic organisation in our long-term memory. Bower et al found that organising words into a categorised hierarchy would help to improve recall. In this study I found that participants recalled more words when the words on this list were organised. This means that the findings of my experiment support both Bowers and Bousfields findings. This implies that there is in fact a short and long-term memory and that there is some kind of semantic organisation of the information in the long-term memory which can improve peoples re-call. Generalisation of findings Target population is the age and group of people an experimenter plans to generalise their findings on. In my experiment the target population was Island School students between the ages 13-14 years old. This was hard to generalise due to the sampling method. The method was biased because only students who were available and around at that time were asked to participate. This could be improved if a larger sample of students were used and not only people who were free to participate. My experiment only involved 20 people, which was too little to generalise a school of 1500 students. It was hard to generalise beyond the target population, as there are individual differences, psychological differences and cultural differences between much of the population. In addition my sample was too small to generalise beyond target population. Applications of everyday life It was found that an organised list of categorized words would be more efficient to remember than a randomly placed list of words. This can be applied to everyday life, for example when teachers teach children they have to teach in a systematical order so it is easier to recall the majority of information. As for a high school there is a syllabus which is organized by categorising the same type of information together. This is the most efficient way for remembering information and recalling it for exams.

Effect of Foreign Direct Investment on Nigerias Development

Effect of Foreign Direct Investment on Nigerias Development Chapter One 1.1 Introduction The drying up in the early 1980’s of commercial bank lending to developing economies made most countries eased restriction on foreign direct investment (FDI) and many aggressively offered tax incentives and subsidies to attract foreign capital (Aitken  and Harrison, 1999). Private capital flow to emerging market economies reached almost $200 billion in 2000. This is almost four times larger than the peak commercial bank lending years of the 1970’s and early 80’s. FDI now accounts for over sixty percent of private capital flow (Levine and  Carkovic, 2002). However, while the explosion of FDI flow remains unmistakable, the growth effect remains unclear. Foreign direct investment (FDI) has been a topic high on the policy agenda in emerging markets. This is due to the contributions FDI make to a country’s external financing and economic growth. The extent of regulation of FDI and other form of capital flow are also issues policymakers take a stand on and economic research has devoted a large effort to these issues. The experience of small number of fast-growing East Asian newly industrialized economies (NIEs), and recently china, has strengthened the belief that attracting FDI is needed to bridging the resource gap of low-income countries and avoiding further build-up of debt while directly tackling the cause of poverty (UNCTAD, 2005). Even though the Asian crisis sounded a cautionary note to premature financial liberalization the call for more accelerated pace of opening up FDI have intensified on the assumption that this will bring not only more stable capital inflow but also greater technological know-how, higher paying jobs, entrepreneurial and workplace skills and new export opportunities (Prasad  et  al., 2003). The increased importance of FDI has brought about international relationships, trade and policies materializing into export and imports between nations. This in turn results financial rewards to host countries. Policy makers across the region of Africa have hoped that attracting FDI with the bait of high tariff protection and generous incentives packages would provide the catalyst for a â€Å"late industrialization† drive (Thandika, 2001). The debt crises in the early 80’s and policies introduced by several countries in Africa also witnessed increased FDI as necessary for economic development. The pursuit of responsible macroeconomic policies combined with an accelerating pace of liberalization, deregulation and above all privatization were expected to attract FDI to Africa (WorldBank, 1997).  However, the record of the past two decades with respect to reducing poverty and attracting FDI as a result of policy changes has been disappointing at best (Ayanwale, 2007). The importance of FDI varies across different sector in the recipient countries. However, in all major country groups, the extractive sector accounts for a significant share of inflow of FDI: for example, Australia, Canada and Norway among developed countries; Botswana, Nigeria and South Africa in Africa; Bolivia, Chile, Ecuador and Venezuela in Latin America and the Caribbean; and Kazakhstan in South-East Europe and the  CIS  (UNCTAD, 2006a). The important of this sector is due to the fact that oil and gas are crucial to the contemporary global economy and their prices are key components of economic forecasts and performance. Crude oil and refined petroleum products constitute the largest single item in international trade, whether measured by volume or value (Steven, 2005). Thus, oil and gas are strategic resources in national, regional and global economies. Despite this significant and strategic influence, empirical evidence suggests that oil and gas abundant economies are among the least growing economies (Sachs and Warner, 1997,  Gelb, 1988, Stevens, 1991, Steven, 2005). This phenomenon is often conceived within the prisms of the â€Å"resource curse† and â€Å"Dutch disease†. Both of which are manifestations of inefficient utilization of resources rather than the inevitable outcome of the availability of oil and gas resources.  The impact of FDI on economic growth of recipient country has been one of varying opinions among authors. A huge literature exists concerning different effects of foreign investment on economic development in a recipient economy. Currently FDI sustains the most dynamic development in the world economy in comparison with other forms of foreign financing (De Gregorio, 1992). Most theoretical and empirical findings (see chapter 3) imply that FDI has a strong positive growth impact on the recipient economy. Within the African context, the Nigerian economy is a unique case, not because it is a developing economy and is quite large, but because during last 15 years the country has not managed to attract significant amounts of FDI (Asiedu, 2002). Typically investment risks are so high in Nigeria that only high profits in export oriented extractive industries (e.g. fuel industry) have attracted much foreign direct investment. This sector exerts a prominent influence on the economy as a key revenue earner. While oil and gas resources have very high revenue yields due to increasing international demand the question of aggregate FDI impact on economic growth remains an open question. This paper attempts to find some answers.   Over the last decade, the Atlantic Ocean off the coast of Western and Southern Africa has become one of the most promising oil exploration areas in the world with a convergence of interest between African governments, multinational oil companies, international Financial Institutions  (Jerome  et  al., 2007). Nigeria falls among the six countries which have become key players in the world of energy stake. However, the economic record and lived experience of mineral-exporting countries has generally been disappointing. The World Bank classification of Highly Indebted Poor Countries include: twelve of the world 25 most mineral dependent states and six most oil dependent. When taken as a group, all â€Å"petroleum rich† less developed countries has witnessed erosion in their living standards and many rank bottom one-third of United Nations Human Development Index. In addition to poor growth records and entrenched poverty, they are also characterized by high level of corruption and a low prevalence of democratization  (Jerome  et  al., 2007).† 1.2 FDI Defined Various classifications have been made of foreign direct investment. For instance, FDI has been described by the Balance of Payment Manual 5th  edition (BPM5) as a category of international investment that reflects the objective of a resident in one economy (the direct Investor) obtaining a lasting interest of a resident in another economy (the direct investment enterprise). The lasting interest implies the existence of a long-term relationship between the direct investor and the direct investment enterprise and a significant degree of influence by the investor on the management of the enterprise. A direct investment relationship is established when the direct investor has acquired 10 percent or more of the ordinary shares or voting power of an enterprise abroad (IMF, 1993). This comprises not only the initial transaction establishing the FDI relationship between the direct investor and the direct investment enterprise but all subsequent capital transactions between them and among affiliated enterprises resident in different economies (Patterson  et  al., 2004). Once a firm undertakes FDI, it becomes a  multinational enterprise  (MNEs). Policymakers believe that foreign direct investment produces positive effects on host economies. Some of these benefits are in the form of  externalities  and the adoption of foreign technology which could be in the form of licensing, agreements, imitation, employee training and the introduction of new processes by the foreign firms (Alfaro  et  al., 2004). Multinational enterprises are said to diffuse technology and management know-how to domestic firms (Tang  et  al., 2008). FDI is conventionally used as a proxy to measure the extent and direction of  MNE  activities (Jones, 1996). Like any other business,  MNEs  have a major objective of maximizing profit and reducing costs. Hence,  MNEs  consider regions with higher returns on investment and enabling environment for business success. This is one of the reasons for more FDI in some places than others. Accordingly  MNE  will invest higher in regions that provide the best mix of the traditional FDI determinants (Berg, 2003). The motivation for investment by multinationals in certain countries much more than others  is discussed elaborately in chapter three 1.3. Background The involvement of  MNEs  (through FDI) in extractive industries has had a chequered history. In the early twentieth century, these industries accounted for the largest share of FDI, reflecting the international expansion of firms from the colonial powers. With a growing number of former colonies gaining independence after the Second World War, and the creation of the Organization of the Petroleum Exporting Countries (OPEC) in 1960, the dominance of these  MNEs  s declined, as did the share of extractive industries in global FDI. From the mid-1970s, in particular, the share of oil, gas and metal mining in world FDI fell steadily as other sectors grew much faster. However, as a result of rising mineral prices, the share of extractive industries in global FDI has recently increased, although it is still much lower than those of services and manufacturing. It is therefore an opportune timeto revisit the impact of FDI into theextractive industries has on economic development. Measuring the effect of FDI on economic growth occupies a substantial body of economic literature. Many theoretical and empirical studies have identified several channels through which FDI may positively or negatively affect economic growth (Akinlo, 2003,  Mello, 1997). Not many studies have reported on the effects of FDI in Africa and most existing studies have concentrated on economies with high FDI in the manufacturing industries unlike economies with high FDI inflow in the extractive sector (as the case of Nigeria). Several factors suggest that the indirect benefits of FDI maybe less in extractive sector especially oil industries. Reasons given for this are that: firstly, the extractive sector (such as oil  sub-sector) is often an enclave sector with little linkages with the other sectors. Secondly, the knowledge and technology embedded in the sector is extremely capital intensive and so transfer of knowledge and technology maybe less. Also, the capital requirement and large economies of scale may not attract new entrants into the sector as in the manufacturing sector.  Furthermore, not all sector of the economy have the same potential to absorb foreign technology or create linkages with the rest of the economy (Hirschman, 1958).  Finally, sales in this sector are foreign market oriented and require fewer input of materials and intermediate goods from local suppliers. Hence will have less forward and backward linkages  (Akinlo, 2004). The  sensitivity of project to world commodity pric e also make it been view as a volatie sector (WorldBank, 2005) Given the pattern of foreign direct investment flow to Nigeria (mostly in oil and gas sector) and the angst-ridden as regards the benefits from the extractive FDI, it is apposite to examine empirically the situation in Nigeria. This constitutes the objective of this research. An analysis of this will be done for the period between 1980 and 2006 1.4  Overview of Foreign Direct Investment 1.5  Natural Resources and Economic Development Since the 1950’s, economists have been concerned that economies dominated by natural resources would somehow be disadvantaged in the drive for economic progress. In the 1950’s and 1960’s, this concern was based upon deteriorating terms of trade between the â€Å"centre† and â€Å"periphery† (Prebisch, 1964) coupled with concern over the limited economic linkages from primary product exports to the rest of the economy (Hirschman, 1958). In the 1970’s, it was driven by the impact of the oil shocks on the oil exporting countries (Wijnbergen  and Van, 1986,  Mabro  and Monroe, 1974). In the 1980’s, the phenomenon of â€Å"Dutch Disease† (the impact of an overvalued exchange rate on the non-resource traded sector) attracted attention (Corden, 1984). Finally in the 1990’s, it was the impact of revenues from oil, gas and mineral projects on government behaviour that dominated the discussion (Stevens, 1991,  Gelb, 1988). The common thread running through these concerns is that the development of natural resources should generate revenues to translate into economic growth and development. Thus the revenues accruing to the economies should provide capital in the form of foreign exchange overcoming what was seen as a key barrier to economic progress. This could be explained both in terms of common sense (more money means a better standard of life) and development theories the requirement for a â€Å"big-push† (Murphy  et  al., 1989), capital constraints (Lewis, 1955,  Rostow, 1960) and dual-gap analysis (Shibley  and  thirlwall, 1981). However, the reality appeared to be the reverse. Countries with abundant natural resources appeared to perform less well than their more poorly endowed neighbors. Thus the term â€Å"resource curse† began to enter the literature (Vanderlinde, 1994). More recently there has been a revival of interest in the phenomenon of â€Å"resource curse†. Furthermore, this has drawn the attention of a much wider audience than previously. Growing concern among a number of non-governmental organizations (NGO’s) regarding the negative effects of oil, gas and mineral projects on developing countries has had several effects. It has forced the World Bank group to consider their role in such projects. This has culminated in the creation of â€Å"the Extractive Industry Review† based in Jakarta to consider whether the World Bank Group should, as a matter of principle, have any involvement with such projects. Disagreement within and between the World Bank and the IMF have further fuelled the debate over how such revenues should be managed.   NGO  concern has also encouraged the more responsible petroleum and mineral corporations to consider the impact of their investment in such projects on the countries concerned. However, in the literature that has focused on â€Å"resource curse†, there are references to countries that allegedly managed to avoid a â€Å"curse† and instead received a â€Å"blessing†. For example, even the report produced by  Oxfam  America (Ross, 2001) which is strongly negative towards such projects, states †¦ â€Å"There are exceptions: some states with large extractive industries – like Botswana, Chile and Malaysia – have overcome many of the obstacles †¦ and implemented sound pro-poor strategies†. There are similar references elsewhere to â€Å"success† stories – Botswana (Hope, 1998, Love, 1994), Chile (Schurman, 1996), Indonesia (Usui, 1996), Malaysia (Rasiah  and Shari, 2001), and Norway (Wright and  Czelutsa, 2002). Nigeria is Africa’s most populous country with close to 132 million inhabitants. However, approximately 55% of the population lives on less than the value of one US dollar per day. The Nigerian economy depends heavily on the oil sector, which contributes 95% of export revenues, 76% of government revenues and about a third of gross domestic product. Before the establishment of democracy in 1999, the country was governed by military generals, under whose rule Nigeria’s economic performance had taken a beating for 15 consecutive years (Datamonitor, 2007). Nigeria has a dual economy with a modern segment dependent on oil earnings, overlaid by a traditional agricultural and trading economy. At independence in 1960 agriculture accounted for well over half of GDP, and was the main source of export earnings and public revenue. The oil sector, which emerged in the 1960s and was firmly established during the 1970s, is now of overwhelming importance to the point of over-dependence. Undoubtedly, Africa and indeed Nigeria is facing an economic crises situation featured by inadequate resources for long-term development, high poverty level, low capacity utilization, high level of unemployment and other Millennium Development Goals (MDGs) increasingly becoming difficult to achieve by 2020. Foreign direct investment has assumed prominent place in her strategy as a way of boosting economic rival and growth. It is also seen by policy makers at all levels as a way of bridging the resource gap of the country and avoiding further debt build-up (UNCTAD, 2005). This has brought about several changes in policy and regulations in order to encourage foreign investor to invest in the country. Other measures include – the liberalization of the foreign investment regime to allow major foreign ownership, lifting foreign exchange controls and the privatization of Nigeria’s public enterprises. This research is aimed to take an in-depth analysis of the major private capital flow foreign direct investment to a growing economy; Nigeria. This investment trend will be narrowed down to the extractive sector and in particular the oil and gas sector with the aim of investigating how investment in this sector translate to economic growth. 1.6 Research Gap During the last decade, a number of interesting studies in the role of foreign direct investment in stimulating economic growth has appeared. Several authors have observed that the major reason for increased effort in attracting more FDI has been stemmed from the belief that FDI has several positive effects (Levine and  Carkovic, 2002, Caves, 1996). In contributing to the importance of FDI, it has also been shown that FDI is three times more efficient than domestic investment (De-Gregorio, 2003). Available evidence for developed countries seems to support the idea that productivity of domestic firms is positively related to the presence of foreign firms (Globerman, 1979). The result for developing countries are not clear, with some finding positive spillover (Blomstrom, 1986,  Kokko, 1994), and others reporting limited evidence (Aitken  et  al., 1997). Earlier studies on FDI showed that target countries receive very few benefits and in most cases negative effect on economic growth (Singer, 1950;  Prebisch, 1968;  Saltz, 1992;  Bos  et  al., 1974 cited in (Katerina  et  al., 2004). A positive  effect is only contingent on the ‘absorptive capacity’ of the host country  (Durham, 2004).  Many research have shown that FDI stimulates economic growth (Borensztein  et  al., 1998, Amy Jocelyn and  Kamal, 1999) as seen in china’s economic growth (Dees, 1998 cited in (Ayanwale, 2007) and Latin American countries (Mello, 1997) showing that inflow of capital brings about increase in investment level. FDI has also been shown to have both a positive and negative effect on economic development depending on the variables[1]  that are used along side the test equation  (UNCTAD, 1998; 1999). Its effect has also been more positively acclaimed in countries with higher institutional capabilities (Olofsdotter, 1998) and economically less advanced countries (like Philippines and Thailand) but negatively on more economically advanced countries like Japan and Taiwan (Bende-Nabende  and Ford, 1998). In essence, the impact FDI has on growth of any economy may be country an period specific and as such there is a need for country specific studies. Several studies have shown varying relationship between FDI and economic growth in Nigeria. For example,  Odozi  (1995)  study showed that Structural Adjustment Policies (SAP hereafter) of Nigeria contributed to the FDI-growth relationship. He revealed that macro-policies before SAP discouraged foreign investors.  Ogiogo  (1995) reported a negative contribution of public investment to GDP growth for the reason of distortion. However, positive linkage effect of FDI-growth relationship was shown by  Aluko  (1961). Private domestic investment was also shown by  Ariyo  (1998)  to contribute positively to raising GDP-growth rate for the period 1970-1995. Oyinlola  (1995) using  Chenery  and Stout’s two-gap model found a positive relationship between FDI and economic growth.  Ekpo  (1995) using time series data revealed that political regime, real income per  capita, inflation rate, credit rating and debt service were key factors explaining variability  in FDI into Nigeria. Using unrelated regression model, FDI was shown to be pro-consumption and pro-import hence showing a negative relationship to domestic investment (Adelegan, 2000 cited in  Ayanwale, 2007) and statistically insignificant effect was shown for FDI-growth (Akinlo, 2004). More recent findings by  Ayanwale  (2007) revealed that FDI contributes positively to Nigeria’s economic growth with the communication sector accounting for the highest potential to grow that economy. He also opined that FDI in the manufacturing sector has a negative relationship with economic growth suggesting that the business climate is not healthy enough for the manufacturing sector to thrive and contribute to positive growth. Crude oil discovery and exploration has been said to have both positive and negative effect on Nigeria. The negative side is seen in term of the environmental degradation, deprived means of livelihood and other economic and social factors experienced by surrounding communities where the oil wells are exploited while the positive side is viewed from the large proceeds from domestic sale and export of petroleum products. However, its effect on the growth of the Nigerian economy as regards returns and productivity is still questionable (Odularu, 2007). This review shows that the debate on the impact of FDI on economic growth is far from being conclusive. The role of FDI can be country specific and its relationship with growth can either be positive, negative or insignificant depending on the macroeconomic dispensation (economic,  institutional  and  technological  conditions) in the recipient country (Zhang, 2001). Even though none of these studies controlled for the fact that must of the FDI was concentrated in the extractive industry, they did not specifically investigate the relationship between oil-FDI and economic growth. This is the focus of this study. 1.7 Research Objectives and Questions Few research on FDI into Sub-Saharan Africa have shown empirical evidence of FDI and economic growth as ambiguous (Ayanwale, 2007). In theory FDI is believed to have several positive effects on the economy of host country (such as productivity gains, technology transfers, the introduction of new processes, managerial know-how and skills, employee training etc), promoting its growth and in general, a significant factor in modernizing the host country’s economy (Katerina  et  al., 2004). However, there is no clear understanding of its contribution to growth (Bora, 2002). This research was driven by the following questions: Has foreign direct investment into Nigerian oil and gas sector brought about economic development? What is the transmission mechanism through which FDI brings about growth 1.8 Methodology 1.9 Dissertation Outline The rest of the paper is organized as follows: Chapter Two: This chapter is the literature review and shall be discussed in three subsection. The first two sections shall seek to review the theories and motivation for Foreign direct investment and the third section deals with the theoretical and analytic review of literature on FDI Growth linkages. This shall seek to answer the question on the mechanism through which FDI result in economic growth. Chapter Three: This chapter discusses the case study Nigeria and reviews the contribution performance and challenges of the oil and gas sector in Nigeria. Also, the impact of this sector on economic growth is discussed. Chapter Four: The methodology and theoretical framework for the analysis is the objective of this chapter. This section discusses the research approach and data collection mode. The variables for analysis and the model for shall be derived. Chapter Five: Data Analysis of the result and findings shall be the aim of this chapter. Chapter Six: This chapter shall form the conclusion of the research and give a summary of the findings, suggestion for improving economic growth in Nigeria and recommendation for further study. Chapter Three Literature Review 3.0 Introduction Foreign direct investment is in general motivated by both â€Å"pull† and â€Å"push† factors. The push factors are external to developing countries and focuses majorly on growth and financial market conditions in industrial countries. On the other hand, the pull factors are dependent (on a lot of factors) domestic policies and characteristics of host countries. While the push factors determine the totality of available resources, the push factors determine its allocation between countries (Ajayi, 2004). The diversity of theoretical and empirical explanations for the impact and influence of FDI (and growth) is without doubt very rich. Many studies among others have emphasized conducive macroeconomic policy, increased liberalization of markets, large domestic markets, liberal trade regime, low labour cost, availability of natural resources, good infrastructure and investment in human capital (bring about an educative workforce) (Ajayi, 2003). This review therefore draws from many of these works with the particular aim of providing an understanding of the theoretical and empirical background, views and present thought on the relationship between FDI and economic growth. The discussion shall be presented in three sections. The first two sections shall discuss the theories and motivation for FDI and the third section involves theoretical and empirical review of the literature of FDI and economic growth from four perspectives: trade or export (openness), linkages and spillover effect, knowledge and technology transfer and human capital. 3.1 Theories of FDI FDI can take the form of a Greenfield investment in a new facility or an acquisition of or merger with an existing local firm. Majority of cross-border investment is in the form of merger and acquisition rather than Greenfield investments. According to estimates by United Nations, 40 to 80 percent of all FDI inflows between 1998 and 2005 were in the form of mergers and acquisition (Hill, 2009). However, FDI flows into developed nations are different from those of developing nations. For developing nations only about one- third of FDI is in the form of cross-border merger and acquisition. This may simply reflect the fact that there are fewer firms to acquire in developing nations (Hill, 2009). For the purpose of this research, I have concentrated on two theories of FDI which are relevant to the study. The first perspective explains why firms in the same industry often undertake FDI at the same time and why certain locations are favoured over others (i.e. the observed pattern of FDI). The second is known as the eclectic paradigm. This perspective is eclectic because it combines the best aspects of other theories into a single explanation. In proceeding with the discussion, we define some terms. When goods are produced at home and then shipped to the receiving country for sale, it is known as exporting. The process of granting a foreign entity (the licensee) rights to produce and sell the firm’s product in return for a royalty fee on every unit sold is known as Licensing. Foreign direct investment has been view as an expensive and risky venture compared to exporting and licensing. This is because firms bear the cost of establishing production facilities in a foreign country or acquiring a foreign enterprise and the risk of doing business in countries with different culture. In exporting, firms need not bear cost associated with FDI and risk can be reduced by the use of local sales agents. Similarly, under licensing, the licensee bears the cost and risks. However, it is worth noting in summary that firms will choose FDI over exporting as an entry strategy when transportation costs or trade barriers make exporting unattractive. Furthermore, firms will favor FDI over licensing (or franchising) when it wishes to maintain control of technological know-how or over its operations and business strategy or when firm’s capabilities are simply not amenable to licensing (Hill, 2009). 3.1.1 The Pattern of FDI 3.1.1.1 Strategic Behaviour The idea that FDI flow reflects strategic rivalry between firms in the global marketplace is the basis for one of the theories of FDI. In studying the relationship between FDI and rivalry in oligopolistic industries F. T. Knickerbocker proposed a variation to this argument. An oligopoly is an industry made up of a small number of large players (for example, an industry in which four firms control 80 percent of a domestic market). One key features of such market is the interdependence of major players: the action of one firm have immediate impact on the major competitors, forcing a response in kind. This interdependence leads to imitative behaviour; rivals are usually quick to imitate opponents in and oligopoly – â€Å"the bandwagon effect†. Imitative behaviour can take many forms in an oligopoly. Some good examples are price war and capacity increase. Rivals imitate lest they be left at a disadvantage in the future. F. T. Knickerbocker argued that the same kind of imitative behaviour characterizes FDI. Although Knickerbockers’ theory and its extensions can help to explain imitative FDI behaviour by firms in oligopolistic industry, it does not explain the choice and efficiency of FDI over exporting or licensing. This is explained by the internalization theory. 3.1.1.2 The Product Life Cycle Theory The product life cycle theory was proposed by Raymond Vernon in the mid-1960s and was based on the observation that for most of the 20th century, a very large proportion of the world’s new products had been developed by U.S. firms and sold first in the U.S. market (e.g. automobiles, photocopiers, televisions and semiconductor chips). Vernon opined that the wealth and size of the U.S. market gave U.S. firms a strong incentive to develop new consumer products and the high labour cost also gave firms in the U.S. an incentive to develop cost-saving process innovations. The theory went further to argue that early in the life cycle of a typical new product, while demand is starting to grow rapidly in the United States, demand in other advanced countries does not make it worth while for firms in those countries to start producing the new product, but it does necessitate some export from the United State to those countries. However, over time the demand for new product starts to grow in other advanced countries. As this happens, foreign producer begin to produce at home for their own market and growing demand causes U.S. firms to setup production facilities in those advanced countries. This limits the potential for export for the United States. Finally, at maturity product becomes standardized, cost consideration start to play a greater role in the competitive process and producer in advanced countries with lower labour cost than the U.S. might now begin to export to the United States. Under intense cost pressure, the cycle by which the United State lo st its advantage to other advanced countries might be repeated once more as developing countries begin to acquire a production advantage over advanced countries (Hill, 2009). The effect of these trends is that over time the United States switches form being an exporter of the product to an importer of the product as production becomes concentrated in lower-cost foreign locations. The product life cycle seems to be an accurate explanation of international trade patterns. However, the product l Effect of Foreign Direct Investment on Nigerias Development Effect of Foreign Direct Investment on Nigerias Development Chapter One 1.1 Introduction The drying up in the early 1980’s of commercial bank lending to developing economies made most countries eased restriction on foreign direct investment (FDI) and many aggressively offered tax incentives and subsidies to attract foreign capital (Aitken  and Harrison, 1999). Private capital flow to emerging market economies reached almost $200 billion in 2000. This is almost four times larger than the peak commercial bank lending years of the 1970’s and early 80’s. FDI now accounts for over sixty percent of private capital flow (Levine and  Carkovic, 2002). However, while the explosion of FDI flow remains unmistakable, the growth effect remains unclear. Foreign direct investment (FDI) has been a topic high on the policy agenda in emerging markets. This is due to the contributions FDI make to a country’s external financing and economic growth. The extent of regulation of FDI and other form of capital flow are also issues policymakers take a stand on and economic research has devoted a large effort to these issues. The experience of small number of fast-growing East Asian newly industrialized economies (NIEs), and recently china, has strengthened the belief that attracting FDI is needed to bridging the resource gap of low-income countries and avoiding further build-up of debt while directly tackling the cause of poverty (UNCTAD, 2005). Even though the Asian crisis sounded a cautionary note to premature financial liberalization the call for more accelerated pace of opening up FDI have intensified on the assumption that this will bring not only more stable capital inflow but also greater technological know-how, higher paying jobs, entrepreneurial and workplace skills and new export opportunities (Prasad  et  al., 2003). The increased importance of FDI has brought about international relationships, trade and policies materializing into export and imports between nations. This in turn results financial rewards to host countries. Policy makers across the region of Africa have hoped that attracting FDI with the bait of high tariff protection and generous incentives packages would provide the catalyst for a â€Å"late industrialization† drive (Thandika, 2001). The debt crises in the early 80’s and policies introduced by several countries in Africa also witnessed increased FDI as necessary for economic development. The pursuit of responsible macroeconomic policies combined with an accelerating pace of liberalization, deregulation and above all privatization were expected to attract FDI to Africa (WorldBank, 1997).  However, the record of the past two decades with respect to reducing poverty and attracting FDI as a result of policy changes has been disappointing at best (Ayanwale, 2007). The importance of FDI varies across different sector in the recipient countries. However, in all major country groups, the extractive sector accounts for a significant share of inflow of FDI: for example, Australia, Canada and Norway among developed countries; Botswana, Nigeria and South Africa in Africa; Bolivia, Chile, Ecuador and Venezuela in Latin America and the Caribbean; and Kazakhstan in South-East Europe and the  CIS  (UNCTAD, 2006a). The important of this sector is due to the fact that oil and gas are crucial to the contemporary global economy and their prices are key components of economic forecasts and performance. Crude oil and refined petroleum products constitute the largest single item in international trade, whether measured by volume or value (Steven, 2005). Thus, oil and gas are strategic resources in national, regional and global economies. Despite this significant and strategic influence, empirical evidence suggests that oil and gas abundant economies are among the least growing economies (Sachs and Warner, 1997,  Gelb, 1988, Stevens, 1991, Steven, 2005). This phenomenon is often conceived within the prisms of the â€Å"resource curse† and â€Å"Dutch disease†. Both of which are manifestations of inefficient utilization of resources rather than the inevitable outcome of the availability of oil and gas resources.  The impact of FDI on economic growth of recipient country has been one of varying opinions among authors. A huge literature exists concerning different effects of foreign investment on economic development in a recipient economy. Currently FDI sustains the most dynamic development in the world economy in comparison with other forms of foreign financing (De Gregorio, 1992). Most theoretical and empirical findings (see chapter 3) imply that FDI has a strong positive growth impact on the recipient economy. Within the African context, the Nigerian economy is a unique case, not because it is a developing economy and is quite large, but because during last 15 years the country has not managed to attract significant amounts of FDI (Asiedu, 2002). Typically investment risks are so high in Nigeria that only high profits in export oriented extractive industries (e.g. fuel industry) have attracted much foreign direct investment. This sector exerts a prominent influence on the economy as a key revenue earner. While oil and gas resources have very high revenue yields due to increasing international demand the question of aggregate FDI impact on economic growth remains an open question. This paper attempts to find some answers.   Over the last decade, the Atlantic Ocean off the coast of Western and Southern Africa has become one of the most promising oil exploration areas in the world with a convergence of interest between African governments, multinational oil companies, international Financial Institutions  (Jerome  et  al., 2007). Nigeria falls among the six countries which have become key players in the world of energy stake. However, the economic record and lived experience of mineral-exporting countries has generally been disappointing. The World Bank classification of Highly Indebted Poor Countries include: twelve of the world 25 most mineral dependent states and six most oil dependent. When taken as a group, all â€Å"petroleum rich† less developed countries has witnessed erosion in their living standards and many rank bottom one-third of United Nations Human Development Index. In addition to poor growth records and entrenched poverty, they are also characterized by high level of corruption and a low prevalence of democratization  (Jerome  et  al., 2007).† 1.2 FDI Defined Various classifications have been made of foreign direct investment. For instance, FDI has been described by the Balance of Payment Manual 5th  edition (BPM5) as a category of international investment that reflects the objective of a resident in one economy (the direct Investor) obtaining a lasting interest of a resident in another economy (the direct investment enterprise). The lasting interest implies the existence of a long-term relationship between the direct investor and the direct investment enterprise and a significant degree of influence by the investor on the management of the enterprise. A direct investment relationship is established when the direct investor has acquired 10 percent or more of the ordinary shares or voting power of an enterprise abroad (IMF, 1993). This comprises not only the initial transaction establishing the FDI relationship between the direct investor and the direct investment enterprise but all subsequent capital transactions between them and among affiliated enterprises resident in different economies (Patterson  et  al., 2004). Once a firm undertakes FDI, it becomes a  multinational enterprise  (MNEs). Policymakers believe that foreign direct investment produces positive effects on host economies. Some of these benefits are in the form of  externalities  and the adoption of foreign technology which could be in the form of licensing, agreements, imitation, employee training and the introduction of new processes by the foreign firms (Alfaro  et  al., 2004). Multinational enterprises are said to diffuse technology and management know-how to domestic firms (Tang  et  al., 2008). FDI is conventionally used as a proxy to measure the extent and direction of  MNE  activities (Jones, 1996). Like any other business,  MNEs  have a major objective of maximizing profit and reducing costs. Hence,  MNEs  consider regions with higher returns on investment and enabling environment for business success. This is one of the reasons for more FDI in some places than others. Accordingly  MNE  will invest higher in regions that provide the best mix of the traditional FDI determinants (Berg, 2003). The motivation for investment by multinationals in certain countries much more than others  is discussed elaborately in chapter three 1.3. Background The involvement of  MNEs  (through FDI) in extractive industries has had a chequered history. In the early twentieth century, these industries accounted for the largest share of FDI, reflecting the international expansion of firms from the colonial powers. With a growing number of former colonies gaining independence after the Second World War, and the creation of the Organization of the Petroleum Exporting Countries (OPEC) in 1960, the dominance of these  MNEs  s declined, as did the share of extractive industries in global FDI. From the mid-1970s, in particular, the share of oil, gas and metal mining in world FDI fell steadily as other sectors grew much faster. However, as a result of rising mineral prices, the share of extractive industries in global FDI has recently increased, although it is still much lower than those of services and manufacturing. It is therefore an opportune timeto revisit the impact of FDI into theextractive industries has on economic development. Measuring the effect of FDI on economic growth occupies a substantial body of economic literature. Many theoretical and empirical studies have identified several channels through which FDI may positively or negatively affect economic growth (Akinlo, 2003,  Mello, 1997). Not many studies have reported on the effects of FDI in Africa and most existing studies have concentrated on economies with high FDI in the manufacturing industries unlike economies with high FDI inflow in the extractive sector (as the case of Nigeria). Several factors suggest that the indirect benefits of FDI maybe less in extractive sector especially oil industries. Reasons given for this are that: firstly, the extractive sector (such as oil  sub-sector) is often an enclave sector with little linkages with the other sectors. Secondly, the knowledge and technology embedded in the sector is extremely capital intensive and so transfer of knowledge and technology maybe less. Also, the capital requirement and large economies of scale may not attract new entrants into the sector as in the manufacturing sector.  Furthermore, not all sector of the economy have the same potential to absorb foreign technology or create linkages with the rest of the economy (Hirschman, 1958).  Finally, sales in this sector are foreign market oriented and require fewer input of materials and intermediate goods from local suppliers. Hence will have less forward and backward linkages  (Akinlo, 2004). The  sensitivity of project to world commodity pric e also make it been view as a volatie sector (WorldBank, 2005) Given the pattern of foreign direct investment flow to Nigeria (mostly in oil and gas sector) and the angst-ridden as regards the benefits from the extractive FDI, it is apposite to examine empirically the situation in Nigeria. This constitutes the objective of this research. An analysis of this will be done for the period between 1980 and 2006 1.4  Overview of Foreign Direct Investment 1.5  Natural Resources and Economic Development Since the 1950’s, economists have been concerned that economies dominated by natural resources would somehow be disadvantaged in the drive for economic progress. In the 1950’s and 1960’s, this concern was based upon deteriorating terms of trade between the â€Å"centre† and â€Å"periphery† (Prebisch, 1964) coupled with concern over the limited economic linkages from primary product exports to the rest of the economy (Hirschman, 1958). In the 1970’s, it was driven by the impact of the oil shocks on the oil exporting countries (Wijnbergen  and Van, 1986,  Mabro  and Monroe, 1974). In the 1980’s, the phenomenon of â€Å"Dutch Disease† (the impact of an overvalued exchange rate on the non-resource traded sector) attracted attention (Corden, 1984). Finally in the 1990’s, it was the impact of revenues from oil, gas and mineral projects on government behaviour that dominated the discussion (Stevens, 1991,  Gelb, 1988). The common thread running through these concerns is that the development of natural resources should generate revenues to translate into economic growth and development. Thus the revenues accruing to the economies should provide capital in the form of foreign exchange overcoming what was seen as a key barrier to economic progress. This could be explained both in terms of common sense (more money means a better standard of life) and development theories the requirement for a â€Å"big-push† (Murphy  et  al., 1989), capital constraints (Lewis, 1955,  Rostow, 1960) and dual-gap analysis (Shibley  and  thirlwall, 1981). However, the reality appeared to be the reverse. Countries with abundant natural resources appeared to perform less well than their more poorly endowed neighbors. Thus the term â€Å"resource curse† began to enter the literature (Vanderlinde, 1994). More recently there has been a revival of interest in the phenomenon of â€Å"resource curse†. Furthermore, this has drawn the attention of a much wider audience than previously. Growing concern among a number of non-governmental organizations (NGO’s) regarding the negative effects of oil, gas and mineral projects on developing countries has had several effects. It has forced the World Bank group to consider their role in such projects. This has culminated in the creation of â€Å"the Extractive Industry Review† based in Jakarta to consider whether the World Bank Group should, as a matter of principle, have any involvement with such projects. Disagreement within and between the World Bank and the IMF have further fuelled the debate over how such revenues should be managed.   NGO  concern has also encouraged the more responsible petroleum and mineral corporations to consider the impact of their investment in such projects on the countries concerned. However, in the literature that has focused on â€Å"resource curse†, there are references to countries that allegedly managed to avoid a â€Å"curse† and instead received a â€Å"blessing†. For example, even the report produced by  Oxfam  America (Ross, 2001) which is strongly negative towards such projects, states †¦ â€Å"There are exceptions: some states with large extractive industries – like Botswana, Chile and Malaysia – have overcome many of the obstacles †¦ and implemented sound pro-poor strategies†. There are similar references elsewhere to â€Å"success† stories – Botswana (Hope, 1998, Love, 1994), Chile (Schurman, 1996), Indonesia (Usui, 1996), Malaysia (Rasiah  and Shari, 2001), and Norway (Wright and  Czelutsa, 2002). Nigeria is Africa’s most populous country with close to 132 million inhabitants. However, approximately 55% of the population lives on less than the value of one US dollar per day. The Nigerian economy depends heavily on the oil sector, which contributes 95% of export revenues, 76% of government revenues and about a third of gross domestic product. Before the establishment of democracy in 1999, the country was governed by military generals, under whose rule Nigeria’s economic performance had taken a beating for 15 consecutive years (Datamonitor, 2007). Nigeria has a dual economy with a modern segment dependent on oil earnings, overlaid by a traditional agricultural and trading economy. At independence in 1960 agriculture accounted for well over half of GDP, and was the main source of export earnings and public revenue. The oil sector, which emerged in the 1960s and was firmly established during the 1970s, is now of overwhelming importance to the point of over-dependence. Undoubtedly, Africa and indeed Nigeria is facing an economic crises situation featured by inadequate resources for long-term development, high poverty level, low capacity utilization, high level of unemployment and other Millennium Development Goals (MDGs) increasingly becoming difficult to achieve by 2020. Foreign direct investment has assumed prominent place in her strategy as a way of boosting economic rival and growth. It is also seen by policy makers at all levels as a way of bridging the resource gap of the country and avoiding further debt build-up (UNCTAD, 2005). This has brought about several changes in policy and regulations in order to encourage foreign investor to invest in the country. Other measures include – the liberalization of the foreign investment regime to allow major foreign ownership, lifting foreign exchange controls and the privatization of Nigeria’s public enterprises. This research is aimed to take an in-depth analysis of the major private capital flow foreign direct investment to a growing economy; Nigeria. This investment trend will be narrowed down to the extractive sector and in particular the oil and gas sector with the aim of investigating how investment in this sector translate to economic growth. 1.6 Research Gap During the last decade, a number of interesting studies in the role of foreign direct investment in stimulating economic growth has appeared. Several authors have observed that the major reason for increased effort in attracting more FDI has been stemmed from the belief that FDI has several positive effects (Levine and  Carkovic, 2002, Caves, 1996). In contributing to the importance of FDI, it has also been shown that FDI is three times more efficient than domestic investment (De-Gregorio, 2003). Available evidence for developed countries seems to support the idea that productivity of domestic firms is positively related to the presence of foreign firms (Globerman, 1979). The result for developing countries are not clear, with some finding positive spillover (Blomstrom, 1986,  Kokko, 1994), and others reporting limited evidence (Aitken  et  al., 1997). Earlier studies on FDI showed that target countries receive very few benefits and in most cases negative effect on economic growth (Singer, 1950;  Prebisch, 1968;  Saltz, 1992;  Bos  et  al., 1974 cited in (Katerina  et  al., 2004). A positive  effect is only contingent on the ‘absorptive capacity’ of the host country  (Durham, 2004).  Many research have shown that FDI stimulates economic growth (Borensztein  et  al., 1998, Amy Jocelyn and  Kamal, 1999) as seen in china’s economic growth (Dees, 1998 cited in (Ayanwale, 2007) and Latin American countries (Mello, 1997) showing that inflow of capital brings about increase in investment level. FDI has also been shown to have both a positive and negative effect on economic development depending on the variables[1]  that are used along side the test equation  (UNCTAD, 1998; 1999). Its effect has also been more positively acclaimed in countries with higher institutional capabilities (Olofsdotter, 1998) and economically less advanced countries (like Philippines and Thailand) but negatively on more economically advanced countries like Japan and Taiwan (Bende-Nabende  and Ford, 1998). In essence, the impact FDI has on growth of any economy may be country an period specific and as such there is a need for country specific studies. Several studies have shown varying relationship between FDI and economic growth in Nigeria. For example,  Odozi  (1995)  study showed that Structural Adjustment Policies (SAP hereafter) of Nigeria contributed to the FDI-growth relationship. He revealed that macro-policies before SAP discouraged foreign investors.  Ogiogo  (1995) reported a negative contribution of public investment to GDP growth for the reason of distortion. However, positive linkage effect of FDI-growth relationship was shown by  Aluko  (1961). Private domestic investment was also shown by  Ariyo  (1998)  to contribute positively to raising GDP-growth rate for the period 1970-1995. Oyinlola  (1995) using  Chenery  and Stout’s two-gap model found a positive relationship between FDI and economic growth.  Ekpo  (1995) using time series data revealed that political regime, real income per  capita, inflation rate, credit rating and debt service were key factors explaining variability  in FDI into Nigeria. Using unrelated regression model, FDI was shown to be pro-consumption and pro-import hence showing a negative relationship to domestic investment (Adelegan, 2000 cited in  Ayanwale, 2007) and statistically insignificant effect was shown for FDI-growth (Akinlo, 2004). More recent findings by  Ayanwale  (2007) revealed that FDI contributes positively to Nigeria’s economic growth with the communication sector accounting for the highest potential to grow that economy. He also opined that FDI in the manufacturing sector has a negative relationship with economic growth suggesting that the business climate is not healthy enough for the manufacturing sector to thrive and contribute to positive growth. Crude oil discovery and exploration has been said to have both positive and negative effect on Nigeria. The negative side is seen in term of the environmental degradation, deprived means of livelihood and other economic and social factors experienced by surrounding communities where the oil wells are exploited while the positive side is viewed from the large proceeds from domestic sale and export of petroleum products. However, its effect on the growth of the Nigerian economy as regards returns and productivity is still questionable (Odularu, 2007). This review shows that the debate on the impact of FDI on economic growth is far from being conclusive. The role of FDI can be country specific and its relationship with growth can either be positive, negative or insignificant depending on the macroeconomic dispensation (economic,  institutional  and  technological  conditions) in the recipient country (Zhang, 2001). Even though none of these studies controlled for the fact that must of the FDI was concentrated in the extractive industry, they did not specifically investigate the relationship between oil-FDI and economic growth. This is the focus of this study. 1.7 Research Objectives and Questions Few research on FDI into Sub-Saharan Africa have shown empirical evidence of FDI and economic growth as ambiguous (Ayanwale, 2007). In theory FDI is believed to have several positive effects on the economy of host country (such as productivity gains, technology transfers, the introduction of new processes, managerial know-how and skills, employee training etc), promoting its growth and in general, a significant factor in modernizing the host country’s economy (Katerina  et  al., 2004). However, there is no clear understanding of its contribution to growth (Bora, 2002). This research was driven by the following questions: Has foreign direct investment into Nigerian oil and gas sector brought about economic development? What is the transmission mechanism through which FDI brings about growth 1.8 Methodology 1.9 Dissertation Outline The rest of the paper is organized as follows: Chapter Two: This chapter is the literature review and shall be discussed in three subsection. The first two sections shall seek to review the theories and motivation for Foreign direct investment and the third section deals with the theoretical and analytic review of literature on FDI Growth linkages. This shall seek to answer the question on the mechanism through which FDI result in economic growth. Chapter Three: This chapter discusses the case study Nigeria and reviews the contribution performance and challenges of the oil and gas sector in Nigeria. Also, the impact of this sector on economic growth is discussed. Chapter Four: The methodology and theoretical framework for the analysis is the objective of this chapter. This section discusses the research approach and data collection mode. The variables for analysis and the model for shall be derived. Chapter Five: Data Analysis of the result and findings shall be the aim of this chapter. Chapter Six: This chapter shall form the conclusion of the research and give a summary of the findings, suggestion for improving economic growth in Nigeria and recommendation for further study. Chapter Three Literature Review 3.0 Introduction Foreign direct investment is in general motivated by both â€Å"pull† and â€Å"push† factors. The push factors are external to developing countries and focuses majorly on growth and financial market conditions in industrial countries. On the other hand, the pull factors are dependent (on a lot of factors) domestic policies and characteristics of host countries. While the push factors determine the totality of available resources, the push factors determine its allocation between countries (Ajayi, 2004). The diversity of theoretical and empirical explanations for the impact and influence of FDI (and growth) is without doubt very rich. Many studies among others have emphasized conducive macroeconomic policy, increased liberalization of markets, large domestic markets, liberal trade regime, low labour cost, availability of natural resources, good infrastructure and investment in human capital (bring about an educative workforce) (Ajayi, 2003). This review therefore draws from many of these works with the particular aim of providing an understanding of the theoretical and empirical background, views and present thought on the relationship between FDI and economic growth. The discussion shall be presented in three sections. The first two sections shall discuss the theories and motivation for FDI and the third section involves theoretical and empirical review of the literature of FDI and economic growth from four perspectives: trade or export (openness), linkages and spillover effect, knowledge and technology transfer and human capital. 3.1 Theories of FDI FDI can take the form of a Greenfield investment in a new facility or an acquisition of or merger with an existing local firm. Majority of cross-border investment is in the form of merger and acquisition rather than Greenfield investments. According to estimates by United Nations, 40 to 80 percent of all FDI inflows between 1998 and 2005 were in the form of mergers and acquisition (Hill, 2009). However, FDI flows into developed nations are different from those of developing nations. For developing nations only about one- third of FDI is in the form of cross-border merger and acquisition. This may simply reflect the fact that there are fewer firms to acquire in developing nations (Hill, 2009). For the purpose of this research, I have concentrated on two theories of FDI which are relevant to the study. The first perspective explains why firms in the same industry often undertake FDI at the same time and why certain locations are favoured over others (i.e. the observed pattern of FDI). The second is known as the eclectic paradigm. This perspective is eclectic because it combines the best aspects of other theories into a single explanation. In proceeding with the discussion, we define some terms. When goods are produced at home and then shipped to the receiving country for sale, it is known as exporting. The process of granting a foreign entity (the licensee) rights to produce and sell the firm’s product in return for a royalty fee on every unit sold is known as Licensing. Foreign direct investment has been view as an expensive and risky venture compared to exporting and licensing. This is because firms bear the cost of establishing production facilities in a foreign country or acquiring a foreign enterprise and the risk of doing business in countries with different culture. In exporting, firms need not bear cost associated with FDI and risk can be reduced by the use of local sales agents. Similarly, under licensing, the licensee bears the cost and risks. However, it is worth noting in summary that firms will choose FDI over exporting as an entry strategy when transportation costs or trade barriers make exporting unattractive. Furthermore, firms will favor FDI over licensing (or franchising) when it wishes to maintain control of technological know-how or over its operations and business strategy or when firm’s capabilities are simply not amenable to licensing (Hill, 2009). 3.1.1 The Pattern of FDI 3.1.1.1 Strategic Behaviour The idea that FDI flow reflects strategic rivalry between firms in the global marketplace is the basis for one of the theories of FDI. In studying the relationship between FDI and rivalry in oligopolistic industries F. T. Knickerbocker proposed a variation to this argument. An oligopoly is an industry made up of a small number of large players (for example, an industry in which four firms control 80 percent of a domestic market). One key features of such market is the interdependence of major players: the action of one firm have immediate impact on the major competitors, forcing a response in kind. This interdependence leads to imitative behaviour; rivals are usually quick to imitate opponents in and oligopoly – â€Å"the bandwagon effect†. Imitative behaviour can take many forms in an oligopoly. Some good examples are price war and capacity increase. Rivals imitate lest they be left at a disadvantage in the future. F. T. Knickerbocker argued that the same kind of imitative behaviour characterizes FDI. Although Knickerbockers’ theory and its extensions can help to explain imitative FDI behaviour by firms in oligopolistic industry, it does not explain the choice and efficiency of FDI over exporting or licensing. This is explained by the internalization theory. 3.1.1.2 The Product Life Cycle Theory The product life cycle theory was proposed by Raymond Vernon in the mid-1960s and was based on the observation that for most of the 20th century, a very large proportion of the world’s new products had been developed by U.S. firms and sold first in the U.S. market (e.g. automobiles, photocopiers, televisions and semiconductor chips). Vernon opined that the wealth and size of the U.S. market gave U.S. firms a strong incentive to develop new consumer products and the high labour cost also gave firms in the U.S. an incentive to develop cost-saving process innovations. The theory went further to argue that early in the life cycle of a typical new product, while demand is starting to grow rapidly in the United States, demand in other advanced countries does not make it worth while for firms in those countries to start producing the new product, but it does necessitate some export from the United State to those countries. However, over time the demand for new product starts to grow in other advanced countries. As this happens, foreign producer begin to produce at home for their own market and growing demand causes U.S. firms to setup production facilities in those advanced countries. This limits the potential for export for the United States. Finally, at maturity product becomes standardized, cost consideration start to play a greater role in the competitive process and producer in advanced countries with lower labour cost than the U.S. might now begin to export to the United States. Under intense cost pressure, the cycle by which the United State lo st its advantage to other advanced countries might be repeated once more as developing countries begin to acquire a production advantage over advanced countries (Hill, 2009). The effect of these trends is that over time the United States switches form being an exporter of the product to an importer of the product as production becomes concentrated in lower-cost foreign locations. The product life cycle seems to be an accurate explanation of international trade patterns. However, the product l